Edited version of private advice

Authorisation Number: 1051746451464

Date of advice: 1 September 2020

Ruling

Subject: GST and permit fees

Question 1

Is a fee (application fee) imposed by an Australian Government Agency (you) in relation to an application for the grant of a permit, a renewed permit or an Agreement, the provision of consideration under subsection 81-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No, an application fee imposed by you in relation to an application for the grant of a permit, a renewed permit or an Agreement, is not the provision of consideration under subsections 81-10(1) of the GST Act. Accordingly, the supply by you for which the application fee is paid is not a taxable supply on which goods and services tax (GST) is payable.

Question 2

Is a permit fee and annual charge imposed by you for the provision of a permission under a permit or an Agreement, the provision of consideration under subsection 81-10(1) of the GST Act?

Answer

No, the permit fee and annual charge imposed by you for the provision of a permission under a permit or Agreement, is not the provision of consideration under subsection 81-10(1) of the GST Act. Accordingly, the supply for which the permit fee and annual charge is paid is not a taxable supply on which GST is payable.

Question 3

Is a site and usage fee (site fee) imposed by you, in relation to undertaken activities permitted under a permit or Agreement consideration for a supply?

Answer

Yes, the site fee imposed by you in relation to undertaken activities permitted under a permit or Agreement is consideration for a supply. Therefore, the supply is a taxable supply under section 9-5 of the GST Act.

Relevant facts and circumstances

You are a department of a Government.

You are registered for goods and services tax (GST).

You grant authority to access areas for commercial purposes through the issue of a permit or entering an Agreement.

You administer laws (Laws) in relation to the provision of permits and entering Agreements.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5

A New Tax System (Goods and Services Tax) Act 1999 Subsection 81-10(1)

A New Tax System (Goods and Services Tax) Act 1999 Subsection 81-10(2)

A New Tax System (Goods and Services Tax) Act 1999 Subsection 81-10(4)

A New Tax System (Goods and Services Tax) Act Regulations 2019 Subsection 81-10.01(1).

Reasons for decision

Legislation

Section 9-5 of the GST Act provides that you make a taxable supply on which GST is payable if, amongst other things you make the 'supply for consideration'.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. The GST-free and input taxed provisions set out in Divisions 38 and 40 of the GST Act are not applicable to the supplies that are the subject of this Ruling.

You are registered for GST and you charge various fees related to processing applications for and providing permissions to entities to undertake activities in areas. The issue that arises under section 9-5 of the GST Act is whether such supplies are made for 'consideration'.

The definition of consideration in subsection 9-15(1) of the GST Act is sufficiently broad to include the fees charged by you that relate to or relate to an application for the provision, retention or amendment of a permission or authority granted under a permit or Agreement. This means that unless Division 81 of the GST Act comes into operation to preclude the fees in question from being the provision of consideration the supplies for which the fees are paid meet the requirements of a taxable supply including that there is a supply for consideration.

Division 81 of the GST Act

Subsection 81-10(1) of the GST Act provides that a payment, or the discharging of a liability to make a payment, is not the provision of consideration to the extent the payment is an Australian fee or charge that is of a kind covered by subsections 81-10(4) or (5) of the GST Act.

Relevantly subsection 81-10(4) of the GST Act covers a fee or charge if the fee or charge relates to or relates to an application for the provision, retention, or amendment, under an, Australian law of a permission, exemption, authority or licence (however described).

The fees are of a kind covered by subsection 81-10(4) of the GST Act therefore they are not consideration unless the fee or charge is also of a kind covered by subsections 81-10(2) and (3) of the GST Act. In this way, the regulations prescribed for subsection 81-10(2) of the GST Act were made to treat the payment of an Australian fee or charge that would otherwise be covered by subsections 81-10(4) and (5) of the GST Act, as consideration for a supply.

Conversely, section 81-15 of the GST Act provides that where a fee or charge is prescribed by regulation, the payment of the fee or charge is not treated as the provision of consideration. Accordingly, a supply to which the fee or charge may relate will not be subject to GST (exempt).

Section 81-15.01 to the GST Regulations sets out those kinds of Australian fees and charges that are prescribed for section 81-15 of the GST Act and which do not constitute consideration. Subsection 81-15.02 (2) of the GST Regulations provides that section 81-15.01 of the GST Regulations does not apply in relation to an Australian fee or charge covered by subsection 81-10.01(1) of the GST Regulations (other than one covered by paragraph 81-10.01(1)(g) of the GST Regulations).

The term 'Australian fee or charge' is defined in section 195-1 of the GST Act as:

Australian fee or chargemeans a fee or charge (however described), other than an Australian tax, imposed under an *Australian law and payable to an *Australian government agency.

An AGA and an Australian law are terms defined in section 995-1 of the ITAA 1997 as:

Australian law means a *Commonwealth law, a *State law or a *Territory law.

Australian government agency means:

(a)  a Commonwealth, a State or a Territory or

(b)  an authority of the Commonwealth or of a State or a Territory.

(*Asterisked terms are defined in the Dictionary in section 195-1 of the GST Act.)

Are the fees payable in relation to a permit an Australian fee or charge?

On the facts provided you are an Australian government agency (AGA). The fees are imposed under an Australian Law being the Laws.

Accordingly, the fees in relation to permits imposed under the Laws (Australian law) that are payable to you (AGA) come within the definition of an Australian fee or charge.

Are the fees payable in relation to an Agreement an Australian fee or charge?

The quantum of the fees payable under an Agreement is determined by negotiation. Nevertheless, the authority (permission) granted under the Agreement and the amount payable for that authority are ultimately imposed under the relevant Laws on the basis that it is the Laws (and associated subordinate legislation) that authorise you to enter an Agreement and to impose the associated fee.

Accordingly, for the purposes of the GST Act, the fees (in relation to or under an Agreement) imposed under the Laws that are payable to you come within the definition of an Australian fee or charge.

Are the fees of a kind covered by subsection 81-10(4) of the GST Act?

Subsection 81-10(4) of the GST Act covers fees and charges that relate to or relate to an application for the provision, retention or amendment, under an Australian law of a permission, exemption, authority or licence (however described). The terms 'permission, exemption, authority or licence' are not defined in the GST Act and therefore take on their ordinary meaning, unless it has a special or technical meaning (Uber BV v Commissioner of Taxation [2017] FCA 110, per Griffiths J at paragraphs 133 to 142).

The ordinary meaning of the term 'permission' as defined in The Macquarie Dictionary online https://www.macquariedictionary.com.au/ Australia accessed 27 August 2020 (Macquarie) is:

permission

noun

1. the act of permitting; formal or express allowance or consent.

2. liberty or licence granted to do something...

Relevant to the fees in question is the word 'permission' which clearly connote allowing, permitting or consenting to something being done. The provision of a permit or authority under an Agreement has the character of a formal permission from the grantor (you) under an Australian law to do something or allow something to be done (conduct activities in managed).

It follows that the authority granted under a permit or Agreement comes within the ordinary meaning of 'permission' in the context of the GST Act. Each of the fees in question relates to the provision, retention or amendment of a permission or relates to an application for the provision, retention or amendment of a permission (however described) and as such are of a kind covered by subsection 81-10(4) of the GST Act.

Are the fees prescribed by the GST Regulations?

Subsection 81-10 (2) of the GST Act may by regulation, expressly include certain Australian fees or charges as being consideration for a supply. Relevantly paragraph 81-10.01(1)(g) of the GST Regulations includes, for the purposes of subsection 81-10(2) of the GST Act, a fee or charge for a supply of a non-regulatory nature whilst paragraph 81-10.01(1)(c) of the GST Regulations includes, a fee or charge for hire, use of, or entry to a facility, other than an entry into a national park.

Section 81-15.01 of the GST Regulations does not apply in relation to an Australian fee or charge covered by subsection 81-10.01(1) of the GST Regulations (other than one covered by paragraph 81-10.01(1)(g) of the GST Regulations).

Under the laws only an AGA may be a supplier of a permission/authority under a permit or an Agreement and as such paragraph 81-10.01(h) of the GST Regulations does not apply.

Are the fees in relation to a permit or an Agreement for a non-regulatory supply?

Paragraph 81-10.01(1)(g) of the GST Regulation ensures that the non-regulatory activities of government are subject to GST where the requirements of section 9-5 of the GST Act are satisfied.

The meaning of the term 'regulatory' is not defined in the GST Regulations or the GST Act. The explanatory statement to the A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No.2) (Explanatory Statement) explains that paragraph 81-10.01(1)(g) of the GST Regulations applies to supplies of goods and services for which fees are imposed where the consumer is provided with something that lacks a regulatory character. In other words, the fee or charge covered by paragraph 81-10.01(1)(g) of the GST regulations does not arise under an Australian law which is intended to for example:

·         regulate behaviour,

·         ensure consumer protection or

·         ensure compliance with certain standards, as they are regulatory in nature.

In construing the definition of 'regulatory', the Explanatory Statement provides that it captures those supplies made by a government agency, where the agency is legislatively empowered to make the relevant supply and the supply is to satisfy a regulatory purpose.

Having had regard to the ordinary meaning of the various terms and the laws, the grant of, or renewal of or an application for a permission/authority is a supply of a regulatory nature and as such paragraph 81-10.01(1)(g) of the GST Regulations will not apply.

To the extent the fee is for the hire, use of or entry to a facility it may be regarded as having a commercial character and therefore not be regulatory in nature (nor would it be covered by section 81-15 of the GST Act).

Are the fees to any extent for the hire, use of, or entry to a facility?

Under paragraph 81-10.01(1)(c) of the GST Regulation a fee is for the hire, use of, or entry to a facility, other than an entry fee to a national park is consideration for a supply and therefore a taxable supply where the requirements of section 9-5 of the GST Act are otherwise satisfied.

The different words in subsection 81-10(4) of the GST Act and paragraph 81-10.01(1)(c) of the GST Regulations create a different link that needs to be established. Subsection 81-10(4) of the GST Act has the broader relationship of the fee or charge only having to 'relate to' a permission or authority (which themselves have a broad meaning). Whereas paragraph 81-10.01(1)(c) has a narrower relationship in that the fee must be 'for' hire, use of, or entry to a facility.

The term 'facility' is not defined in the GST Act and therefore take on its ordinary meaning, unless it has a special or technical meaning. The ordinary meaning of the term 'facility' as defined in the Macquarie accessed 27 August 2020 is:

facility

1. something that makes possible the easier performance of any action; advantage: transport facilities; to afford someone every facility for doing something.

2. freedom from difficulty; ease: facility of understanding.

3. readiness because of skill or practice; dexterity: compose with great facility.

4. an easy-flowing manner: facility of style.

5. ready compliance.

6. (in electronic devices) a specific capability or function.

7. (plural) Also, toilet facilities. bathroom and toilet.

8. a building or complex of buildings, designed for a specific purpose, as for the holding of sporting contests, launching of rockets, etc.

9. a bank or other financial account, with various aspects such as high interest rates, designed to make transactions easier for the customer...

It can be seen from the definition that the ordinary meaning of the word 'facility' is very broad. A facility is:

• something that makes possible the easier performance of any action
• a place, amenity, or piece of equipment provided for a particular purpose
• a building or complex of buildings, designed for a specific purpose, as for the holding of sporting contests, launching of rockets, etc

There is nothing in the context in which the word facility is used that would imply that the broad nature of the term should be restricted but for the specific exclusion of an entry fee to a national park.

Given the wide ordinary meaning of facility, an ordinary park, just like a national park, would be a facility as would the areas in question. They are all spaces that makes possible the undertaking of outdoor activities by the public.

Factors that point (although not conclusively) to a fee being for hire, use or entry into a facility include that the fee is based on time, area/location, number of people or number of entries to a facility. These factors are indicative and not conclusive, and any determination needs to turn on the particular facts of each case

Application fee

A non-refundable, prescribed application fee is payable on submitting an application for either a permit or Agreement.

The application fee is payable to you for administration services and, ultimately, to recoup the associated administration costs incurred in processing the application or renewal. That is, the application fees are not for the hire, use or entry into a facility. These fees are essentially paid for your administration services that relate to the provision of a permit or an Agreement.

Permit fee

A permit fee is payable for permit, based on the terms of the permit. A similar annual charge is payable under an Agreement with the quantum payable agreed under that Agreement.

The permit fee is a flat fee set in the regulations and the quantum is not based or related to the number of entrants into the areas. The annual charge under an Agreement is not prescribed under the regulations but in practice the fees are calculated by reference to the permit fees. In this regard the annual fee payable under an Agreement is similar to the fee payable under the permit and is paid to obtain a permission.

In determining what the fee is for, it is relevant to consider what the applicant is supplied with in return for the payment of the fee. The fee is paid in return for the provision of a permission or authority. The permission or authority allows the applicant to conduct certain activities in certain areas it would not be allowed to do without the permission or authority. The fee itself is not referable to these permitted activities. This is reflected in the fact that a single annual fee is payable even though activities are performed across multiple sites and are not based on time, area or the number of people or entries.

On that basis, the permit fees under the permit and the annual charges payable under an Agreement are not for the hire, use or entry to a facility.

Site Fees

Site fees payable under a permit are directly referable to the location of the areas, the number of participants and duration of the activities. With regards to the use fees payable under an Agreement these are also calculated on the basis number of persons, time, and locations.

The calculation of the site fees based on time, location and number of people undertaking activities in the areas are factors that point to the fee being paid for the use of a facility. Accordingly, the better view, is that the site fees are for the use of a facility (being the areas).

On that basis the site fees, are consideration for a supply. As the requirements of a taxable supply under section 9-5 of the GST Act are otherwise satisfied GST is payable on those supplies for which the site fees are paid.

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